H. 3650 – License Tax Standardization
H. 3650 attempts to streamline and simplify business licensing in the state. It would create a uniform business license tax, that would expire on the 30th of April of each year. This proposed licensing tax would be based upon the adjusted gross income of a given business. A clearly defined and easily understood licensing fee would be a tremendous step for making South Carolina an easier environment in which to do business, but this bill adopts a “one step forward, two steps back” approach.
The calculation and payment of a business license based on adjusted gross income should be a simple matter. A business owner would simply calculate their adjusted gross income (AGI), and multiply it by the assessment factor. An assessment factor of 2.5 percent of AGI and an AGI of 100,000 dollars would mean a license fee of 2,500 dollars. Unfortunately, a simple and easily understood system is beyond this bill.
H. 3650 would create within the office of the Secretary of State the Business License Class Schedule Board. This board would be composed of 9 members, 6 of which would be legislators or their designees. 2 of the other positions would be filled by representatives of the South Carolina Association of Counties and the Municipal Association of South Carolina, two special interest groups. The board would be tasked with determining the License Class Schedule, or assessment ratio using data from the IRS and the classification codes from the North American Industry Classification System in odd years. There would be classifications, or assessment ratios, ranked from lowest to highest. Unfortunately, this is where H. 3650 gets even more complicated.
H. 3650 would allow for counties and municipalities to approve additional classifications or assessment ratios based on “particularized considerations as needed for economic stimulus” after a vote of the county or municipal council, and would allow them to review these revised considerations in executive session, away from the public. These sessions would be exempt from Freedom of Information Act requests, though any new classifications would have to be approved in public. Essentially, counties and cities would be able to consider different tax ratios for certain favored industries within their borders, away from public view and exempt from FOIA.
Little imagination is needed to see how this system could very easily be abused.
For South Carolina to be a beacon for business, simplicity is needed, not more planning boards, or more ways to reward favored and politically favored businesses.
Far from being a simplification of the state’s business licensing regime, H. 3650 further muddies the waters while masquerading as a clarification.